The Index Dilemma: Should Bitcoin-Holding Companies Like Strategy Remain in Traditional Equity Benchmarks?

The inclusion of Bitcoin-holding companies in traditional equity benchmarks like the S&P 500 and Russell 2000 has sparked a heated debate among investors, index providers, and corporate strategists. As institutional adoption of Bitcoin accelerates, the question of whether firms like Strategy (MSTR), which hold significant Bitcoin treasuries, should retain their place in these indices hinges on balancing innovation, risk diversification, and market stability. This analysis explores the strategic implications of index inclusion/exclusion, drawing on recent data and expert insights.

Index Inclusion Criteria: Profitability vs. Asset Concentration

Traditional equity benchmarks prioritize financial metrics such as profitability, market capitalization, and liquidity. For example, the S&P 500 requires companies to demonstrate profitability in the most recent quarter and across the past four quarters, maintain a minimum market cap of $22.7 billion, and ensure sufficient liquidity according to guidelines. In 2025, Coinbase Global (COIN) and Block (XYZ) met these criteria and were added to the S&P 500, reflecting their integration into traditional financial infrastructure and diversified business models as reported. However, Strategy, despite qualifying on financial metrics, was excluded due to concerns over its business model being "closely tied to Bitcoin rather than a core operational business" according to analysis.

Index providers like MSCI have further complicated the debate by proposing a ≥50% digital-asset threshold, which would exclude companies where cryptocurrencies constitute half or more of total assets according to proposals. Critics argue this threshold is arbitrary and introduces volatility into index composition, as Bitcoin's price directly affects a firm's eligibility according to experts. The Bitcoin Coalition and other stakeholders have pushed for an operations-based definition of "primary business" instead, emphasizing neutrality and index integrity as stated.

Strategic Implications for Bitcoin Treasury Stocks

The inclusion or exclusion of Bitcoin-holding companies in indices has profound implications for capital allocation and investor behavior. For firms like Strategy, which holds over 632,457 BTC (worth ~$68 billion as of September 2025), index inclusion would amplify liquidity and institutional exposure. However, the current market environment has exposed vulnerabilities in their business model. Approximately 60% of Bitcoin treasury companies are underwater on their holdings, and buying activity has plummeted from 168 Bitcoin in July to 28 in November 2025, signaling a collapse in equity arbitrage according to market data.

Exclusion from major indices could exacerbate these challenges. If MSCI's proposed threshold is implemented, firms like Strategy-which holds 77% of its assets in Bitcoin-could face billions in passive outflows, forcing equity values below net asset value and threatening their ability to raise capital according to analysts. This would also send a signal to public companies that large-scale Bitcoin holdings carry structural risks, particularly given the mismatch between short-term corporate liabilities and the long-term nature of crypto investments according to financial experts.

Diversification, Correlation, and Investor Sentiment

Proponents of Bitcoin treasury stocks argue that their low correlation with traditional assets offers diversification benefits. Historical data from April 2022 to March 2025 shows Bitcoin's average correlation with U.S. equities at 35%, making it a potential hedge during market stress according to analysis. Institutional investors increasingly view crypto as a multi-asset diversifier, with 91% of high-net-worth individuals agreeing it is critical for long-term wealth preservation according to surveys.

However, this diversification argument is nuanced. During extreme events like the 2020 pandemic, Bitcoin's correlation with equities has fluctuated, sometimes moving in tandem with traditional assets according to data. Moreover, as AI-driven growth and inflation dynamics reshape markets, the role of Bitcoin as a standalone diversifier remains contested according to industry reports.

The Future of Index Strategy

The dilemma facing index providers is whether to prioritize innovation or stability. Including Bitcoin-holding companies aligns with the growing acceptance of digital assets but risks overconcentration in volatile assets. Excluding them preserves traditional benchmark integrity but may alienate investors seeking exposure to emerging technologies.

For now, the Russell indexes appear more flexible, with no explicit digital-asset thresholds in 2025 according to index providers. However, as MSCI's proposal gains traction, other providers may follow suit. The outcome will shape not only the valuation of Bitcoin treasury stocks but also the broader perception of crypto as a corporate asset class.

Conclusion

The index dilemma reflects a broader tension between tradition and innovation in finance. While Bitcoin-holding companies like Strategy offer diversification and growth potential, their asset concentration and volatility challenge the stability of traditional benchmarks. As index providers weigh these factors, investors must assess whether the inclusion of such firms aligns with their risk tolerance and long-term objectives. In a rapidly evolving market, the answer may lie in a hybrid approach: maintaining access to innovation while mitigating concentration risks through dynamic index criteria.